So you want to start a brewery

“So You Want to Start a…” is a new series sponsored by Upsourced Accounting as a way to highlight the business side of the local alcohol industry. Making the right business decisions can be the difference between success and failure. While beer, wine, and spirits are fun, a lot of work occurs behind the scenes in order to provide you with that early morning hangover.

© Catherine Murray 2012, www.photokitchen.net

A couple weeks ago I met Dan Cochran, owner of Four String Brewery, at his brewery in Grandview to find out how tough it was to go from home brewer to brewery owner. What’s easy, what’s hard, is it too financially risky, how do you even find funding, are you constantly drunk at work, I mean it has to be the best life ever, right?

Dan took me to the back to show off his equipment, unconventionally made from old commercial dairy equipment. He showed me his Grundy Tanks, a food-processing tank, which was originally in a Marzetti’s factory, now his 15-barrel fermenter tank, and his 30-barrel fermenter, an old horizontal dairy tank. He also showed me the raw ingredients: hops kept in the cooler, grain in 50-pound bags, grain leaves in blue barrels. (Dan has a deal with a local farmer who hauls away the grain for free, getting free feed for his livestock in return.)

After seeing all the equipment, I sat down with Dan in his office to learn what it’s like to start and run his fully functional brewery, now entering its second year of operation.

When you decided “I’m going to do this,” what were your first steps?
I started talking to people I knew in the industry. For me it wasn’t just “I’m going to open a brewery and here’s my budget and order the brewery system” because of the fact that I didn’t have a lot of money. I had to engineer a system from dairy equipment. I called friends in the commercial brewing industry that I’ve known for a while. The guitar player in my band, Rick, is a mechanical engineer and got involved pretty quickly. There’s a lot of stuff in the brewery that an engineer would be interested in. It’s thermodynamics. You want to move this amount of product at this temperature, and change it to this temperature. Rick would do these formulas and knock a number out and I would call three different commercial brewers, and go through this stuff and get a number back and Rick would say, “Yeah, that’s what I have right here.” So it was nice to have a friend who’s an engineer and I can pay with beer that can help me put things together, as well as friends in the industry. I started with a system of what it would cost to put it together. You can take that number and add 50% to it.

How did you finance the brewery?
My wife and I have savings, and I went out and got a SBA loan from small bank in Mount Vernon, where I’m originally from. We also recently secured funding for an expansion. I talked to a few big banks and they’d have nothing to do with me. So I went up to a small town bank, they ran some numbers, and said “We’re going to do it.” I couldn’t get to the next level without that help, or without selling half my company off.

© Catherine Murray 2012, www.photokitchen.net

What permits did you need to get started?
I had to register with several federal offices. But the thing I didn’t anticipate was the City of Columbus Building and Zoning Services. It required a ton of permits and inspections; it slowed me down by a couple months. That was the frustrating part, once you’ve built a brewery and spent that start up money. You need to get beer in the market right away because you need to start generating income. I had to wait for all of that to come full circle with the city. I did it all myself. I was my own general contractor, which I think was a mistake. I remember that summer; a friend of mine asked if I was going to get a general contractor. And I said, “How much does that cost?” And he said, “Take your project and add 20% to it.” I said there’s no way I’m going to do that, but I should have totally spent 20% upfront because I spent more than that in the lag time of a couple months to get open. If I would have had a GC who would have known all this stuff, he could have banged it out. I learned this stuff the hard way frankly.

There are a lot of homebrewers who think they can start breweries. As someone who’s done that, describe the challenges.
The big challenge for is to make sure I carve out the time for the beer. That doesn’t mean just making it, that means thinking about it, working on quality control, planning production. There were a lot of challenges I didn’t anticipate. It was way harder than I thought, and I thought it was going to be tough. There’s a point where you hang yourself out there financially – you quit your job and there’s no going back. Even if you wanted to quit you can’t – I was committed. I didn’t have any business partners; my wife and I own the company. As a business owner if the buck stops with you it changes the way you look at things. There’s pressure every month for payroll, for bills, but I’ve never had more fun in my life. It’s the hardest thing I’ve ever done. And I love every minute of it.

How many times did you think to yourself “maybe this was a mistake?”
I literally looked in the mirror towards the end of building the brewery, once I started production, and I had to tell myself everyday, “If it were easy everyone would do it.” It was so hard. You were mentioning about home brewers wanting to start a brewery and that’s my background, home brewing. I think a lot of people not only underestimate the work, but also underestimate from a business standpoint how much beer it takes to be a profitable company. You have to make a hell of a lot of beer. That’s the bottom line. If you don’t set yourself up to crank out real production you’re not going to make it. Brewing beer is a tough, physical job. The romance goes away pretty quickly. My brewery is a 300-gallon homebrew rig. So there’s a lot of hard work in a brew day.

What’s been your biggest lesson learned, going from homebrewer to brewery owner?
You can’t listen to other people. When you’re building a business, everybody and their brother who’s never owned a business will give you advice. I got a lot of, “Ooooo seriously, you quit your job to start a brewery?” I got that non-stop. But once you’re open, and the business is doing well, everybody just shuts up. Believe in what you’re doing, and don’t give up. There is no instant payoff. It’s going to take years and years of hard work. It’s going to take 10 years if it goes fast, to build it to where I want it to be.

© Catherine Murray 2012, www.photokitchen.net

How much time are you at the brewery every week?
Around the clock, 70 hours a week. It’s not always here, but out with clients too. It’s been a crazy and unbelievable year. People here in Columbus like to drink craft beer. I only have one employee, and that person runs and operates beer production, I handle all sales and business operations… I have to force myself in my schedule to put aside time every day to make sure the books are straight, to strategic. Bookkeeping is the last thing on Earth I want to do, I hate it. I do it all myself. I have an accountant that helps with the tax side but I do the daily invoice entry and I’ll be taking on more of that stuff. You have to know your books. You have to be comfortable in your books. The first 6 months of business was so insane, I just put my head down and said okay, and if I sell more I’ll make more. After 6 months I sat down and put the whole picture together with my accountant. I’ve just recently gotten my arms around all of that, and it’s a good feeling to know the ins and outs. At the end of the day it’s not a super complicated business, I buy raw materials, turn it into beer, and I sell beer. Tracking keg float has mystified a couple accountants already. You cannot absolutely track it, and that’s why you collect deposits. They just go out into the world and you try to collect as many as you can. Kegs are really expensive, biggest thing I underestimated.

Talk to me about the sales aspect of owning a brewery.
I’ve played music in Columbus for 20 years, so I knew a lot of people in the bar business. It’s business-to-business sales and it’s about personal relationships. It’s about going out there and introducing yourself and being around and letting them know that you care about their business and do what you say you’re going to do. Don’t make promises you can’t keep. It won’t work in the long run. That’s been a big part of it, getting to know your customers and letting them know you’re there. It’s fun too, because when a new bar adds my beer I want to help them sell that beer, and they get business, it’s a partnership. That’s also what I look for in my accounts; I want someone who wants to work with me. For long-term success I think it’s important we plan and work together.

Do you feel the brewing industry is highly competitive or more “let’s build a community”?
The brewing industry is different from a lot of other industries in that brewers really do help each other. Local breweries have helped me, and I have helped them. And I’ve found everyone to be really open. I didn’t know that a year ago. Brewers do help each other, but they are very competitive. The more good Columbus beer there is, the better it is for all of us. I know some of the established breweries in Columbus say to me and other new breweries in town, “You guys have to make good beer. We have to make good beer.”

What if some of the new breweries don’t make good beer, does it reflect poorly on you as a local brewer?
There’s two ways to see it. It would be good for me if I’m overly competitive, but long term that’s not the win. The win is they brew good beer, I brew good beer, and people in Columbus drink good Columbus beer. It will help legitimize Columbus beer to beer drinkers, I honestly believe that. When I ask bars what they have that’s local, they say Great Lakes. Great Lakes is a fine product, but it’s not local. I want all of us to break that. Five years from now, when there is a bar with twelve tap handles, five of them are Columbus beers, that’s what I want to see. But because that’s what people want, it can’t be philanthropy.

If I’m a home brewer who wants to open a brewery, what advice would you have for me?
Get a pile of money, get ready to work, and don’t plan on paying your rent with it. The reinvestment never ends. There are breweries right now doing $1M a year in sales, and have $300-400K slated for equipment next year. Everybody is expanding. Which is exciting and scary, because when will it end? Will it level off or will it tip? I think it will level off, there was a spike in the 90’s, but I think it’s going to level off for 20 years. Regionalized food and beer is not just a fad.

This is a guest post by Craig Baldwin. Craig is a former public accountant who’s currently 1/3 of Upsourced Accounting. He’s also a freelance writer, BBQ enthusiast, and gives golf lessons on the weekends.